Interim President Mike Smith this month took a “deep dive” into the college’s finances and concluded the school’s status quo is not financially viable. It has $11.4 million in long-term debt and $300,000 in past-due bills, he said. Two-thirds of that is more than 90 days late, he said.
“This is the only way that I can see to give this college some stability,” Smith said.
Under the plan, Farrell will pay the college $3.5 million up front and assume $3.5 million in debt the college owes the Roman Catholic Diocese of Burlington, which sold the school its North Avenue campus. That will reduce the college’s debt to $4.3 million, according to Smith. Farrell intends to build a mix of market-rate, affordable and senior housing on the site.
The college in 2010 borrowed $10 million to buy the property under former president Jane Sanders, wife of U.S. Sen. Bernie Sanders (I-Vt). It borrowed $3.6 million from the diocese and $6.5 million from People’s United Bank. Since then, the school has failed to meet the fundraising and enrollment growth goals it used to borrow the money.
Burlington College is on academic probation from the regional accrediting agency because of financial concerns, as well as concerns about the school’s governance. Former President Christine Plunkett resigned abruptly in September. Smith agreed to serve as interim leader through December to stabilize the school.
Without selling the land, the college would owe $735,000 this year in debt service, he said. The sale will reduce that amount to $300,000, Smith said.
“Our debt service is bleeding us to death,” he said.
The school will keep 7.3 acres, including the main building and a grassy area behind it. That parcel has room for expansion, plans show, such as student housing.
The deal with Farrell is not final. Smith plans to sign a memorandum of understanding with Farrell by Nov. 1. The MOU will include a 60-day window for land preservation groups to offer the school more than $7 million to preserve the land overlooking Lake Champlain, he said.
The Roman Catholic Diocese on Monday said it is still reviewing the proposal. The Vermont Educational and Health Buildings Finance Agency, which issued the college tax-exempt bonds, also has not approved the sale.
“This is not the magic bullet … it’s a plan to give us some time,” Smith said.
The school still needs to increase enrollment, but this will give it time to see whether a new recruitment strategy is working and make adjustments, he said.
The college did not seek proposals from other developers, Smith said. The college had chosen Farrell to do a similar project and Smith said he felt it was important to keep working with him.
“I think it would be unfair to cut Eric out now, given all the processes that Burlington College went through,” he said. No other developers approached him, he said.
Smith and Farrell had a series of negotiations in which he asked how much Farrell could pay.
“What we came up with was a value of $7 million,” Smith said. He said that amount is in line with a bank appraisal of the property.
Smith said Farrell’s original plan was poor for two reasons. First, the college would not be paid until the back end of the deal, in fiscal year 2019 at the latest. The college can’t wait that long, Smith said.
Second, under that plan, the college would be a co-developer with Farrell. Under the new plan, Farrell is solely responsible for having his project approved by the city.
Smith said he has talked to the city about the the plan “in general terms” but since the school will no longer own the property, “once the sale goes in, I don’t care.”
Under the old plan, Farrell in collaboration with Champlain Housing Trust and Cathedral Square, was to build a mix of senior housing, affordable housing and market-rate housing, including some single-family homes. The college would have realized about $5 million once the project was complete.
Under the new plan, the college will sell the lakefront land directly below the college green behind the diocese building, as well as land on the north side of the property, next to Lakeview Cemetery.
There will be three, three-story buildings and four, five-story buildings as well as 21 single-family homes, according to a drawing. Plans include 60 units of affordable housing, 75 units of senior housing and 300 units of market-rate housing.
There will also be a public access path that links North Avenue to the Burlington bike path. The college will keep an unobstructed view of the lake, Smith said, but will once again be in an “urban environment,” like its former location in the Colodny Building down North Avenue.
Champlain Housing Trust and Cathedral Square still intend to work with Farrell on the project, Smith said. Farrell did not return a call for comment.
Selling the land will also save the college money on property taxes, which it only recently started paying, Smith said.
The college also owes $250,000 to the Vermont Economic Development Authority, has a $1 million line of credit with People’s United Bank, and a $500,000 bridge loan secured by Antonio Pomerleau.
Smith said the school will repay those debts as well as part of the $6.7 million owed to People’s United with the $3.5 million from Farrell.
Faculty member Sandy Baird said “the plan is timely and is in the best interest of Burlington College at this point.” Other faculty members said they are happy that the school seems like it will be able to survive.
Several students had less positive reactions. Smith met with students 12 days ago and said he was considering development and land conservation equally, student Ned McEleney said. He did not tell them he was closing a deal with Farrell, he said.
“Mike Smith has been at Burlington College for a little over a month, and will only be staying until January, yet he has been allowed to sign a deal that will change the identity of the college forever with no outside input from faculty, staff, or students. This is a major decision that I do not support, especially without transparency,” McEleney said.
Student Allise Hewes said “last semester my eco-psychology course frequented the space behind our school — snowshoeing, tracking and cosmic tree healing. Where would we continue these activities when five-story buildings lie where the trees once did?”
Smith said he has not shared the plan with the entire board yet, but has shared it with the board’s executive committee, which includes chairman Yves Bradley, Tom Torti, Karen Paul and Armando Vilaseca.
Last month, Smith said the college’s future depended on fundraising. He said he would like to bring in $1 million by July.
Smith said Monday he has one donor who has pledged $50,000 if the school raises another $100,000. He said he hopes to bring in $250,000 by June. Smith made clear that fundraising is not his responsibility alone.
“The board needs to fundraise,” he said. The college is also planning an outreach event at the end of the month, he said.